Tuesday, November 24, 2015

The 2014/15 season was not one of the best for Everton, as
they slumped to 11th in the Premier League. Not just my assessment, but also that of the club’s hierarchy, as chairman Bill Kenwright drily
observed that “last season was not the one Evertonians had hoped for.” Even the
normally irrepressible manager Roberto Martinez noted, “2014/15 was a very
tough and demanding season at times.”

This was particularly disappointing, as the previous season
(Martinez’ first in charge) had seen Everton achieve a club record points haul
in the Premier League era, finishing 5th and thus qualifying for the Europa
League.

Despite a glut of injuries, Everton have returned to form
this season and currently sit 7th in the league, while there is a decent chance
of silverware in the Capital One Cup, where they have progressed to the
quarter-finals.

"Spanish Steps"

In contrast to the travails on the pitch, chief executive
Robert Elstone claimed, “We made great strides off the pitch in 2014/15”, though
in truth Everton’s financial figures were a bit of a mixed bag. Yes, the club
achieved record turnover of £126 million, but they also made a loss of £4
million, while net debt rose to £31 million.

In fact, the bottom line was £32 million worse than the previous
year, as Everton moved from a £28 million profit to a £4 million loss. This was
largely due to profit from player sales falling by £25 million to just £3
million, as the 2013/14 figures included the sale of Marouane Fellaini to
Manchester United.

Revenue rose £5 million (4%), despite broadcasting income
falling £3 million (4%) to £82 million, as a result of increases in both
commercial income, up £7 million (37%) to £26 million, and gate receipts, £1
million (8%) higher at £18 million. On the other hand, there were substantial
increases in the cost base: wages climbed £8 million (12%) to £78 million;
other operating costs rose £4 million (16%) to £30 million; and player
amortisation was up £1 million (5%) to £20 million.

This was slightly offset by net interest payable,
principally from the servicing of securitised debt and bank overdraft,
decreasing by £1.3 million (26%) to £3.8 million, due to a reduction in
interest rates.

It should be noted that Everton have changed the way that
they have classified revenue this year, including a restatement of the 2014
results. This has no net impact, but means that the figures reported for gate
receipts and broadcasting income have reduced, while commercial income has
increased (by £6.3 million in 2014). The club stated that this now represents a
“more accurate presentation of turnover”, though maybe the board just got fed
up with all the criticism received about the relatively low level of commercial
income.

In fairness to Everton, it is no great surprise that profits
have fallen, as this is the second year of the current three-year Premier
League deal, so there are limited opportunities for significant revenue growth,
while wage bills continue to grow. This can be seen by the fact that four of
the seven Premier League clubs that have reported 2014/15 figures to date have
announced lower profits.

That said, Everton are one of only two clubs that have
actually lost money, the other one being Manchester United, whose £4 million
loss is almost entirely due to their failure to qualify for Europe in 2014/15.
Given the amount of TV money on offer, the expectation would be that most clubs
in the top flight would manage to be in the black. Indeed, 15 of the 20 Premier
League clubs were profitable in 2013/14.

Everton had the 4th highest profit in the Premier League
that season with £28 million, only behind Tottenham £80 million, Manchester
United £41 million and Southampton £29 million.

This shows how much a football club’s profitability can be
influenced by profits on player sales. As an example, in 2014/15 Southampton
made £44 million from this activity, manly due to the sales of Adam Lallana and
Dejan Lovren to Liverpool plus Calum Chambers to Arsenal, while the previous
season saw Tottenham Hotspur make an amazing £104 million (largely due to the
mega sale of Gareth Bale to Real Madrid) and Chelsea £65 million (David Luiz to
Paris Saint-Germain).

Everton themselves made £28 million from player sales in
2013/14, largely due to Fellaini’s transfer, but just £3 million in 2014/15. In
terms of keeping their squad together, this is clearly a good thing, but
obviously had a big adverse effect on their financial results.

To an extent, Everton’s small loss in 2015 is a return to
their customary performance, as they had been consistently loss-making between
2006 and 2012 (with a cumulative £45 million loss in those seven years) before
the improvement seen in 2013 and 2014

However, it is fair to say that in many years Everton have
effectively subsidised their underlying deficit with the sale of a major
player. Indeed, in the 11 years from 2005 Everton basically broke-even (making
total profits of £5 million), but £128 million of this came from player sales.
This has been a regular theme going back to 2005 when the £24 million profit
was almost entirely because of Wayne Rooney’s big money transfer to Manchester
United.

Not only that, but Everton have also been selling off the
family silver with a number of sale and leaseback deals plus the sale of their
Bellefield training ground in 2011, which generated an £8 million profit.

Given the impact that player sales have on the finances of a
club like Everton, it is worth exploring how football clubs account for
transfers, as it has a major impact on reported profits. The fundamental point
is that when a club purchases a player the costs are spread over a few years,
but any profit made from selling players is immediately booked to the accounts.

So, when a club buys a player, it does not show the full
transfer fee in the accounts in that year, but writes-down the cost (evenly)
over the length of the player’s contract. Therefore, if Everton spent £25
million on a new player with a 5-year contract, the annual expense would be
only £5 million (£25 million divided by 5 years) in player amortisation (on top
of wages).

However, when that player is sold, the club reports straight
away the profit on player sales, which essentially equals sales proceeds less
any remaining value in the accounts. In our example, if the player were to be
sold 3 years later for £32 million, the cash profit would be £7 million (£32
million less £25 million), but the accounting profit would be higher at £22
million, as the club would have already booked £15 million of amortisation (3
years at £5 million).

This is all horribly technical, but it does help explain how
clubs can spend big in the transfer market with relatively little immediate
impact on their reported profits. Even though the annual cost of purchasing
players is therefore somewhat reduced in the profit and loss account, it is
worth noting that the impact of Everton’s increasing spend in the transfer
market over the last two years has pushed up player amortisation, which has
just about doubled from £11 million in 2013 to £20 million in 2015.

Obviously this is nowhere near as much as the really big
spenders like Manchester United (£100 million), Chelsea (£72 million) and
Manchester City (£70 million), but it is something that Everton will have to
keep an eye on in future years.

The other side of the coin here is that all these signings
have helped strengthen the balance sheet with player values (reported as
intangible assets) climbing to £53 million, compared to only £24 million just
three years ago. So what, you might say, but it is obviously good for any club
to have better quality “assets” on the pitch.

In point of fact, the accounting treatment understates the
value of Everton’s squad, as it does not fully reflect the market value of
internationals like John Stones, Seamus Coleman, Phil Jagielka, James McCarthy
and Leighton Baines, while attributing no value to homegrown players like Ross
Barkley.

Given all the accounting complexities arising from player
trading, clubs often looks at EBITDA (Earnings Before Interest, Taxation,
Depreciation and Amortisation) for a better understanding of how profitable
they are from their core business. In Everton’s case, EBITDA was only slightly
above zero for many years before shooting up to £25 million in 2014, though it
did fall back to £18 million last season.

This highlights the impact of the new TV deal in 2014, as
the combined £43 million of EBITDA in the last two seasons is nearly twice as
much as the club generated in the previous seven seasons.

This is pretty good, but at the same time helps to outline
the challenge for clubs like Everton, as the EBITDA at the leading clubs is
significantly higher, despite their larger wage bills: Manchester United £120
million, Manchester City £83 million, Arsenal £64 million, Liverpool £53
million and Chelsea £51 million.

Since 2009 Everton’s revenue has grown by 58% (£46 million)
from £80 million to £126 million. Not bad at all, but much of this is down to
the increasing TV deal (£33 million), which is thanks to the central Premier
League negotiating team, as opposed to the club’s board. Commercial revenue has
apparently risen by £17 million in the same period, while gate receipts have
fallen £4 million, though this is misleading, as it does not take into
consideration the club’s restatement of the revenue categories in 2014.

In any case, the growing TV money has allowed Everton to
change their traditional business model, so they no longer need to sell to buy,
which in the past led to the departures of players like Jack Rodwell, Mikel
Arteta, Joleon Lescott and Andy Johnson.

Despite significant growth over the last two years,
Everton’s revenue of £126 million is still a lot lower than the Champions
League elite, e.g. the top four clubs all earn well above £300 million:
Manchester United £395 million, Manchester City £352 million, Arsenal £329
million and Chelsea £320 million.

Little wonder that Kenwright once asked, “How does Everton
do it? How do we consistently perform so well in these days of cheque book
fuelled football?” This is a reference to Everton consistently outperforming
their revenue level.

That said, Everton are not doing too badly in revenue terms,
as they are the 8th highest in the Premier League, just behind Newcastle
United, but ahead of Aston Villa, West Ham and Southampton.

In fact, if the gross revenue from the outsourced catering
and kit deals were to be added back, then Everton’s revenue would be around £8
million higher at £134 million.

What’s more, Everton’s revenue is now the 20th highest in
the world according to the Deloitte Money League, ahead of famous clubs such as
Marseille £109 million, AS Roma £107 million and Benfica £105 million.

However, this does not help them much domestically, as there
are no fewer than 14 Premier League clubs in the world’s top 30 clubs by
revenue (and all of them are in the top 40). As Roberto Martinez emphasised,
“The Premier League is the most competitive league in Europe week in week out.”

Everton’s revenue mix shows their reliance on Premier League
TV money: broadcasting 65% (though this was down from 70% in 2014), commercial
21% and gate receipts 14%. As Elstone said, “Our financial performance, like so
many Premier League clubs, was underpinned by the second year of a TV deal that
beat all expectations.”

That’s certainly the case. In fact, in 2013/14 nine Premier
League clubs had a greater reliance on TV money than Everton with four clubs
getting more than 80% of their revenue from broadcasting: Crystal Palace,
Swansea City, Hull City and WBA.

In 2014/15 Everton’s share of the Premier League TV money
fell 5% from £85 million to £81 million. The distribution of these fundsis based on a fairly equitable
methodology with the top club (Chelsea) receiving £99 million, while the bottom
club (QPR) got £65 million.

Most of the money is allocated equally to each club, which means 50% of the domestic rights (£22.0 million in 2014/15), 100% of the overseas rights (£27.8 million) and 100% of the commercial revenue (£4.4 million). However, merit payments (25% of domestic rights) are worth £1.2 million per place in the league table and facility fees (25% of domestic rights) depend on how many times each club is broadcast live.

In this way, Everton were hurt by falling from 5th place to 11th, which cost them £7 million, though this was slightly mitigated by being shown live on one more occasion, which was worth an extra £1 million. There was also £4.4 million of commercial revenue awarded to all Premier League clubs, though I suspect that Everton might have reported this within commercial income, even though most other clubs classify it as broadcasting income.

"Heart and Soul"

This would help explain why Everton’s total broadcasting
income in the accounts was only £81.7 million, even though the total Premier
League distribution was £80.6 million and Europa League prize money was around
£5 million (€7.5 million). Incidentally, this would also account for some of
the reported growth in commercial income.

Either way, Elstone is right to draw attention to the new TV
deal stating in 2016/17: “Of course, we are now less than a year away from
receiving the benefit of the next deal and one that makes the current,
outstanding deal look modest.”

My estimates suggest that Everton would receive an
additional £37 million under the new contract, increasing the total received to
an incredible £118 million. This is based on the contracted 70% increase in the
domestic deal and an assumed 30% increase in the overseas deals (though this
might be a bit conservative, given some of the deals announced to date). Of
course, if they were to finish higher in the league table, they would earn even
more.

Everton’s Europa League experience saw them earn €7.5
million. This was not much reward for their efforts in reaching the last 16,
which included wins against Wolfsburg, Lille and Young Boys Bern, but was at
least the highest sum received by the English entrants in that tournament.

Martinez has claimed that “being a regular team in Europe is
what we want”, but also struck a note of caution when adding that it
“unquestionably affects performance in the Premier League”, as it tests squad
strength to the limit.

The big money is obviously in the Champions League with
English clubs averaging €39 million in 2014/15 and is getting higher, as the
new TV deal from the 2015/16 season is worth an additional 40-50%, thanks to BT
Sports paying more than Sky/ITV for live games.

Everton’s gate receipts grew by £1.1 million (7%) from £16.8
million to £17.9 million in 2014/15 through a combination of higher attendances
and more match day income from participation in the Europa League, offset by
fewer home domestic cup games. Attendances rose from 37,732 to 38,406, the
highest recorded since the 2003/04 season with 12 of 19 Premier League games
sold out.

The club attributed the increase in attendances to
“successful season ticket and hospitality membership campaigns” with almost
28,000 season ticket holders being 4,000 more than the previous season.

Although there were some small increases in ticket prices in
2014/15, these were frozen for the 2015/16 campaign. The club has emphasised
its “commitment to affordable pricing and making football at Goodison
accessible to young fans” with the continuation of the £95 season ticket for
junior school children.

Despite all these encouraging initiatives, the fact remains
that Everton’s match day income of £18 million is miles behind the top six
clubs: Arsenal £100 million, Manchester United £91 million, Chelsea £71
million, Liverpool £51 million, Tottenham £44 million and Manchester City £43
million.

This was acknowledged by Elstone, “The real springboard to
greater things will be the new stadium”, and the club remains in talks with
Liverpool City Council over Walton Hall Park. However, Everton fans would be
entitled to be sceptical about this project, as two other proposed stadium
moves have come to nothing: first King’s Dock in 2003, then Kirkby in 2009.

Most obviously, there is the question of who would pay for a
new stadium? Elstone has already said, “We would need to think very carefully
about a new stadium that adds the burden of significant debt on the club.” The
hope would be that Liverpool City council would put in “a level of investment” as part of a wider regeneration of the area, but this appears a tad optimistic given the spending cuts imposed on the council. Either way, it is clear that little tangible progress has been made with Elstone informing this week's AGM that no agreement had been reached on any partnership.

In that meeting, the chief executive once again spoke of the “fantastic opportunity for the football club”, but described it as “a hugely challenging funding project”. He has been seeking a potential naming rights partner, but these are difficult to secure, and he
admitted earlier this year that this is proving slower than anticipated.

Although Kenwright has admitted that “leaving our beloved
Goodison Park would bring a degree of sadness”, the need for a new stadium is
now more important than ever with West Ham about to benefit from their move to
the Olympic Stadium, while Tottenham and Chelsea have both announced major
redevelopment initiatives.

Everton’s commercial income surged 37% (£7 million) from £19
million to £26 million in 2014/15, comprising £10.4 million for sponsorship,
advertising and merchandising plus £15.6 million for other commercial
activities. The sponsorship growth was due to “the long-term support of key
partners such as Chang and Kitbag, as well as the club’s first year of the new
kit partner deal with Umbro”, while other commercial revenue benefited from
participation in the Europa League.

As we saw earlier, it is not completely clear what the club
has included within commercial income. For example, if we add up the money from
the three major deals (Chang £5.3 million, Umbro £6 million and Kitbag £3
million), we get £14.3 million, which is more than the total of £10.4 million
reported for sponsorship, advertising and merchandising.

Whatever it consists of, Everton’s commercial income of £26
million pales into insignificance compared to heavyweights such as Manchester
United, who generate £196 million from this activity. That comparison might be
a little unfair, but it is worth noting that Tottenham earned £42 million and
Aston Villa and Newcastle United also earned £26 million (in the 2013/14 season).

"All roads lead to Rom"

That said, the comparisons are a bit misleading, as Everton
have outsourced their catering and kit deals. If they were to report these
revenues gross (like most other clubs), their commercial income would rise by
£8 million to £34 million.

This is not too shabby, but could be better, as Elstone
admitted: “Our commercial revenues benchmark well against teams finishing below
sixth in the table, but it is a fact that we lag well behind – and
disproportionately behind – clubs playing regularly in Europe.”

Many supporters have criticised the 10-year Kitbag deal,
which provides a guaranteed £3 million a year plus royalties for running the
retail operation, replacing a deal with JJB worth £1.6 million a year. However, Elstone seems happy enough, "Kitbag is a great deal for this football club. It was from day one." He has also described it as a good arrangement that “de-risks Everton in a
notoriously difficult business sector”.

However, it does betray a lack of ambition, especially when
we look at some of the kit supplier deals secured by other clubs, e.g. Arsenal
– Puma £30 million, Liverpool – New Balance £28 million, Tottenham – Under
Armour £10 million, and Aston Villa – Macron £4 million.

Similarly, while it is laudable that Everton have the
longest running shirt sponsorship deal in the Premier League, having first
signed with Chang back in 2004, this does raise the question of whether they
could get more elsewhere than the £5.3 million from the current deal (worth £16
million for the three years up to 2016/17).

The Umbro deal was described as a club record and is
reportedly worth £6 million a season, which would be twice as much as the
previous Nike contract, though the latest accounts suggest that it might not be
so high in reality.

Everton’s wage bill rose 12% (£8 million) to £78 million,
following continued investment in the squad, with the additions of Romelu
Lukaku, Gareth Barry, Muhamed Besic and Brendan Galloway, together with loan
spells for Christian Atsu and Aaron Lennon. In addition, new contracts were
awarded to Roberto Martinez, Ross Barkley, Seamus Coleman and John Stones.

Furthermore, the average number of employees increased from
247 to 274, including unexplained growth in management and administration from
57 to 71.

The wages growth outpaced revenue growth, so increased the
wages to turnover ratio from 58% to 62%. However, this is still the second best
ratio the club has recorded in the last six years and is well within the norm
in the Premier League with 13 of the 20 clubs grouped in a fairly narrow range
of 56-64% the previous season. Furthermore, the ratio would fall to 58% if the
club added back its outsourced revenue (retail and catering).

Everton’s ability to outperform their financial resources is
underlined by their relatively low wage bill, which was only the 10th highest
in the Premier League in 2013/14, behind Sunderland and Aston Villa. Even
though this has increased to £78 million, to place this into context, it is
dwarfed by the elite clubs, who all pay around £200 million: Manchester United
£203 million, Manchester City £194 million, Chelsea £193 million and Arsenal
£192 million.

Everton’s 2014/15 increase of £8 million is very similar to
the growth reported by other clubs so far: West Ham £9 million, Southampton £9
million and Stoke City £6 million.

One thing that is quite striking in Everton’s accounts is
the £4 million growth in other operating costs from £26 million to £30 million,
especially as this cost category has shot up by 40% (£9 million) in the last
two years without any substantial explanation.

This seems quite high for a club of Everton’s size,
especially as the retail and catering businesses have been outsourced, so
theoretically other operating costs should be lower than other clubs (as net
profits are reported in revenue).

Even though Kenwright has argued, “We’re not a selling club.
Never really have been.”, Everton averaged net sales of £7 million a year
between 2009 and 2014. However, that has changed in the last two years with
average net spend of £26 million, as the club has made no major sales, but
invested significant sums on improving Martinez’ squad, smashing their own
transfer record in the process when bringing in Lukaku from Chelsea.

Elstone accepted that things had changed: “In the past, when
85p in every £1 we earned was spent at Finch Farm, we had little scope to
strengthen the club away from the training ground.”

He underlined the move away from the previous hand-to-mouth
existence: “Increasingly, we’ve also been able to sign talented young
footballers, who join us not as the finished article, but as great prospects
and yet still command significant transfer fees. Players like Galloway, Henen
and Holgate might not have joined with that singular focus on the first team.”

In fact, Everton’s net spend of £51 million in the last two
seasons is the sixth highest in the Premier League. Although this was still a
long way below the two Manchester clubs (City £151 million and United £145
million), it was surprisingly more than Chelsea £40 million and only juts
behind Liverpool £57 million.

Clearly, fans will be concerned that Everton will be tempted
to sell their young stars with Chelsea offering £40 million for John Stones in
the summer and Lukaku and Barkley also worth large sums in today’s market.

However, Martinez says that Everton are no longer forced to
sell their prize assets: “We don't fear that situation. What you fear is when
you have to sell players to balance the books, when the owner says you need to
cash in on two or three star players, that becomes a problem. But it is not the
situation at Everton. That is not to say we are going to sell any player or not
sell any player, but the decisions we make will be for the benefit of the squad
and club going forward.”

Everton’s net debt rose £3 million from £28 million to £31
million, but the gross debt was actually cut by £9 million from £49 million to
£40 million with the real driver being the £12 million reduction in cash
balances, which fell from £21 million to £9 million. Thanks to higher TV money,
not to mention the funds from the Fellaini sale, net debt has improved
considerably from the £45 million level in the years up to 2013, which Elstone
explained thus: “our pursuit of success has stretched our finances.”

There are basically two elements to Everton’s debt: (a)
25-year loan of £21 million, which bears a high interest rate of 7.79%, leading
to annual payments of £2.8 million; (b) an annual loan of £19 million renewable
every August, securitised on Premier League TV money, at a stonking 8.2%
interest rate.

The short-term loan was taken out with Vibrac, a shadowy
offshore corporation based in the British Virgin Islands, which has also
provided funding to other English clubs, including West Ham, Southampton, Fulham
and Reading. This loan was repaid in August, but has been replaced by another
loan with the equally mysterious James Grant (JG) Funding.

Everton also have contingent liabilities of £20 million (£9
million dependent on future appearances and £11 million loyalty bonuses if
certain players are still with the club on specific dates), up from £13 million
the previous season. On top of that, the club confirmed that it has entered
into net transfer agreements since the accounts closed of £22 million.

Like many other clubs, it is clear that Everton are spending
as much as they can, thus building up their transfer debt, in order to give
themselves the best chance of success, though this should not be a problem, so
long as they avoid the nightmare scenario of relegation.

In fairness, Everton’s debt is one of the lowest in the
Premier League with only seven clubs owingless than the Toffees. In fact, five clubs have debt above
£100 million, namely Manchester United £411 million, Arsenal £234 million,
Newcastle United £129 million, Liverpool £127 million and Aston Villa £104
million.

The high interest rate on Everton’s loans mean that their
financing costs are among the largest in the Premier League. Although nowhere
near as much as the interest paid by the likes of Manchester United and
Arsenal, this certainly does not help the club’s finances. Looked at another
way, the £4-5 million paid out each year in interest would fund the wages of
one world class player (or two very good additions to the squad).

The significance of interest payments is highlighted by
looking at the 2015 cash flow. Cash generated from operating activities was
£11m, but the cash balance ended up falling £12 million after a series of
payments: £7 million net on player transfers; £4 million on those interest
payments; £3 million on capital expenditure (stadium refurbishment and a new
pitch); and £9 million repayment of loans.

This unwelcome burden is even more emphasised when reviewing
the cash flow over the last seven years. In that period, Everton generated £61
million of cash, mainly from operating activities £49 million, though this was
supplemented by the sale of the old training ground £9 million and other loans
(net) £3 million.

Nearly half (46%) of this cash £28 million was required for
interest payments, which was more than the £25 million spent on “good” things:
£17 million for new players and £8 million infrastructure investment. The
remaining £8 million simply increased the cash balance.

Of those clubs that have so far published their 2015
accounts, Everton and Southampton are the only ones to have reduced cash
balances. Others have significantly increased cash, notably the “big boys”,
i.e. Arsenal (up to £228 million), Manchester United £156 million and
Manchester City £75 million.

Of course, those hefty interest payments to external finance organisations underline the fact that the
current Everton directors have not invested in their club, in stark contrast to
benefactors at other clubs, who have put in substantial sums without taking a
penny of interest. This helps explain why some supporters are unhappy with the
board, as seen by a hired plane flying over the match against Southampton in
August trailing the banner “Kenwright & Co #timetogo”.

The club claim that they are open to a sale, but it has not
gone unnoticed that they have been looking for a buyer for a long time. Back in
2012 Kenwright proclaimed, “My desire to find a person, or institution, with
the finance to move us forward has not diminished. We will find major
investment.”

"Born to run"

However, since then, nothing, nada, zilch. There were
whispers of American interest recently, but one of the potential buyers, Rob
Heineman, admitted that his Sporting Club group were never close to a takeover.

This has led some to believe that Everton are not entirely
serious in their quest for investment, though to be fair other clubs such as
Aston Villa and West Brom have also struggled to find a suitable purchaser in
the last few years.

Elstone has maintained the party line: “The search for the
funds that will allow the club to leap forward continues without any slowing
down or any less enthusiasm. It is worth stating again, and very clearly, there
are no unreasonable conditions on the sale of Everton. The only condition is
one we think is perfectly reasonable - that the new owner has to want to, and
must be able to, take the club forward.”

Fair enough, but if a club like Everton with the 8th highest
revenue in the Premier League, relatively low debt, a mega new TV deal on the
horizon, opportunities for commercial growth and a much-admired academy, cannot
find a buyer, then something is surely amiss.

"Call me"

It’s not so much that Kenwright and Elstone have done
anything wrong, it’s the fact that they appear to be relatively comfortable
with the status quo,
not showing the requisite ambition to drive the club forward.

The club’s Latin motto, “Nil
Satis Nisi Optimum” (“Nothing but the best is good enough”), may
feel a touch ambitious when competing against the riches of today’s elite, but
as Martinez rightly said, Everton should “strive to be the best we can be.”

The manager added, “We want to build around young players –
our strategy is to build something and keep what we see as the future. We want
to achieve things and see how high we can go.” Spot on, Roberto.

Tuesday, November 10, 2015

West Ham’s 2014/15 season was like the
proverbial game of two halves under Sam Allardyce, as a promising start took the club into the top
four at Christmas, before a wretched slump produced just three victories in the
next 21 games.

The Hammers still finished in a comfortable 12th place,
which should presumably have satisfied joint chairman David Sullivan, as he
described “retaining our Premier League status” as one of his highlights of the
season. The club also qualified for Europe for the first time since 2007,
albeit only by finishing top of the Fair Play table.

Nevertheless, they decided not to renew the manager’s
contract, bringing in former player Slaven Bilic as Big Sam’s replacement in
June. The Croatian has put together a very decent squad and already has wins
against Arsenal, Liverpool, Manchester City and Chelsea under his belt. On the
other hand, his team has also lost against Leicester City, Bournemouth and
Watford.

Be that as it may, these are exciting times at West Ham, as
the club is investing a lot of money in new players and will move to the £700
million Olympic Stadium in Stratford next season after 112 years at the Boleyn
Ground.

"Slaven to the Rhythm"

The stadium move could revolutionise the club and is an
amazingly good deal for the Hammers. The basic facts are that West Ham have a
99-year lease on the stadium starting from June 2016 and will pay just £15
million towards the conversion costs, which they can easily cover from the
proceeds of selling Upton Park to property developer Gaillard Homes.

The stadium has a 54,000 capacity, around 19,000 more than
the club’s current 35,000 seats, so will bring in substantially more money. The
financial gains will be even more impressive, considering that West Ham will
only pay annual rent of £2 to £2.5 million, while the running costs will be
covered by the taxpayer.

Unsurprisingly, many have criticised this arrangement,
though West Ham has argued that it has at least avoided the kind of “white
elephants” seen in former Olympic host cities such as Barcelona, Athens and
Beijing.

"A new royal family, a wild nobility"

Indeed, the club has mounted a vigorous defence: “Without us
the stadium would lose money. West Ham make a substantial capital contribution
towards the conversion works of a stadium on top of a multi-million pound
annual usage fee, a share of food and catering sales, plus provide extra value
to the naming rights agreement. Our presence underwrites the multi-use legacy
of the stadium and our contribution alone will pay back more than the cost of
building and converting the stadium over the course of our tenancy.”

On the other hand, it is worth noting that the deal is more
favourable to the club than the one agreed with Manchester City in similar
circumstances. They pay all the overheads on top of £4 million rent for the Etihad
Stadium, which was funded by the taxpayer for the 2002 Commonwealth Games.
Along the same lines, Chelsea and Tottenham would have to pay £10-15 million a
year for using Wembley Stadium while their grounds are being developed.

Little wonder that Chris Bryant, the Shadow Secretary of
State for Culture, Media and Sport described the deal as “astoundingly good”
for West Ham, even though it will be a jolt for many fans to leave Upton Park
with all its memories and fantastic atmosphere. The new stadium is in an
excellent location, just minutes from Canary Wharf and the City andclose to the Westfield shopping centre
with very good transport links and infrastructure.

As vice-chairman Karren Brady said, “Our new home will be
one of the greatest arenas in world football and a platform to transform the
future of our great club.”

There is little doubt that this move will provide a major
boost to the club’s finances, though these have steadily improved in the last
two seasons in any case with West Ham reporting record revenue and another
profit in 2014/15, though profit was down £7 million from £10 million to £3
million.

Revenue rose 5% (£6 million) from £115 million to £121
million, largely on the back of £3.6 million more TV money, though the other
revenues streams also grew, albeit not much: commercial up 9% (£1.9 million) to
£22 million and match receipts up 2% (£0.4 million) to £20 million. Player
sales also increased by £2 million to £3 million.

On the other hand, costs grew at a faster rate: wages
increased by 14% (£9 million) from £64 million to £73 million; player
amortisation was up 20% (£4 million) to £22 million; and other expenses rose
11% (£2 million).

Of course, these days most clubs in the Premier League
should make money, given the spectacular increases in the TV deals, allied with
the restrictions on wage growth imposed by Financial Fair Play (FFP). In fact,
only five of the 20 clubs in the top flight made a loss in 2013/14, the last
season when all clubs have published their accounts.

Three of the five clubs that have so far reported their
2014/15 figures have registered lower profits, though only Manchester United
actually lost money, due to their failure to qualify for Europe. This may well
be a similar story at other clubs, as this is the second year of the current
three-year TV deal, thus restricting revenue growth, while player costs are
still rising.

A football club’s profitability can be very much influenced
by profits on player sales, as can be seen in 2014/15 with Southampton making
£44 million, manly due to the sales of Adam Lallana and Dejan Lovren to
Liverpool plus Calum Chambers to Arsenal. The previous season saw Tottenham
Hotspur make an amazing £104 million (largely due to the mega sale of Gareth
Bale to Real Madrid), Chelsea £65 million (David Luiz to Paris Saint-Germain)
and Everton £28 million (Marouane Fellaini to Manchester United).

Even though West Ham’s profit from this activity increased
in 2014/15, it was still only £3 million, which could either be considered as
implying that they are not a selling club (a good thing) or an indictment of
their player development (a bad thing).

An additional £25 million from player sales would make a big
difference to the bottom line, but it’s not going to happen in 2015/16 when the
only sale of note was Stewart Downing to Middlesbrough for £5.5 million, while
many players left on free transfers: Jussi Jaaskelainen, Modibo Maiga, Guy
Demel, Carlton Cole and Kevin Nolan.

Even so, West Ham have managed to make profits in the last
two years, which is a major improvement, considering that before 2013/14 they
lost money seven years in a row, amounting to aggregate losses of £144 million.

In fairness, the small £4 million loss in 2012/13 already
represented a step in the right direction, as the club had been averaging £23
million annual losses before then. This is a sign of the greater financial
stability that the majority owners, David Sullivan and David Gold, have brought
to the club since taking over in 2010.

To underline how little impact player sales have had on West
Ham’s figures, this activity has only contributed £37 million to West Ham’s
profits in the last nine years, i.e. less than Southampton made in the 2014/15
season alone. You have to go back as far as 2008 (£16 million) and 2009 (£22
million) for any meaningful profits from transferring players. In fact, West
Ham have only averaged £1.4 million from player sales over the last four
seasons, while actually contriving to lose £8 million in 2011.

The good news is that West Ham’s figures are no longer being
hit by exceptional charges, which have had a major adverse impact on their
accounts, adding up to £58 million since 2007.

The most notable charge was the £32 million they had to pay
for breaching Premier League rules when acquiring Carlos Tevez and Javier
Mascherano. They have also shelled out £10 million compensation for loss of
office and £6 million following the termination of Dean Ashton’s contract due
to severe injury.

It is worth exploring how football clubs account for transfers,
as it has a major impact on reported profits. The fundamental point is that
when a club purchases a player the costs are spread over a few years, but any
profit made from selling players is immediately booked to the accounts.

So, when a club buys a player, it does not show the full
transfer fee in the accounts in that year, but writes-down the cost (evenly)
over the length of the player’s contract. Therefore, if West Ham spent £25
million on a new player with a 5-year contract, the annual expense would be
only £5 million (£25 million divided by 5 years) in player amortisation (on top
of wages).

However, when that player is sold, the club reports straight
away the profit on player sales, which is essentially sales proceeds less any
remaining value in the accounts. In our example, if the player were to be sold
3 years later for £32 million, the cash profit would be £7 million (£32 million
less £25 million), but the accounting profit would be higher at £22 million, as
the club would have already booked £15 million of amortisation (3 years at £5
million).

This is all horribly tedious, but it does help explain how
clubs can spend big in the transfer market with relatively little immediate
impact on their reported profits. Even though the annual cost of purchasing
players is therefore somewhat reduced in the profit and loss account, it is
worth noting that the impact of West Ham’s increasing spend in the transfer
market has pushed up player amortisation, which has more than doubled from £10
million in 2012 to £22 million in 2015.

Obviously this is nowhere near as much as the really big
spenders like Manchester United (£100 million), Chelsea (£72 million) and
Manchester City (£70 million), but it is still worth keeping an eye on in
future years.

The other side of the coin here is that all these signings
have helped strengthen the balance sheet with player values (reported as
intangible assets) climbing to £55 million, compared to only £15 million just
four years ago. So what, you might say, but it is obviously good for any club
to have better quality “assets” on the pitch.

That said, West Ham still have net liabilities (assets less
liabilities) of £47 million, though this has improved by £4 million in the last
12 months.

Given all the accounting complexities arising from player
trading, clubs often looks at EBITDA (Earnings Before Interest, Taxation,
Depreciation and Amortisation) for a better understanding of how profitable
they are from their core business. In West Ham’s case, EBITDA has recovered
from negative £8 million in 2012 to £28 million in 2015, though it did fall
back from £33 million the previous season.

This is not too bad, but at the same time helps to outline
the challenge for clubs like West Ham, as the EBITDA at the leading clubs is
significantly higher, despite their larger wage bills: Manchester United £120
million, Manchester City £83 million, Arsenal £64 million, Liverpool £53
million and Chelsea £51 million.

Since 2009, West Ham’s revenue has grown by 59% (£45
million) from £76 million to £121 million. The majority of this growth is down
to TV money, which rose £35 million (79%) from £44 million to £79 million,
though commercial income did grow £8 million (53%) from £14 million to £22
million and match day was up £2 million (13%) from £18 million to £20 million.

The highest increase within commercial came from retail and
merchandising, which has risen 95% from £3.7 million to £7.3 million, partly
due to the decision to bring the online retail business in house in 2012.

The impact of promotion from the Championship is evident
from the £75 million increase since 2012 with all revenue streams benefiting
from being in the Premier League.

Despite this significant growth, West Ham’s revenue of £121
million is still a lot lower than the Premier League elite, e.g. the top four
clubs all earn more than £300 million: Manchester United £395 million,
Manchester City £352 million, Arsenal £329 million and Chelsea £320 million.

West Ham are very much mid-table in revenue terms in the
Premier League (10th highest the previous season) around the same level as
Everton, Aston Villa and Southampton. Although the Hammers 2014/15 revenue
growth of 5% was not as high as the previous season, this is very largely
linked to the cycle of the TV deal. As last season wasonly the second year of the current
three-year TV deal, it is unlikely that any club will see significant revenue
gains in 2014/15.

However, West Ham’s revenue is now the 21st highest in the
world according to the Deloitte Money League, ahead of famous clubs such as
Marseille £109 million, AS Roma £107 million and Benfica £105 million.

This is basically due to TV money, which contributes nearly
two-thirds (65%) of West Ham’s revenue. Commercial income and match receipts
account for 18% and 17% respectively.

It is therefore no surprise that Brady has stated that
retention of “our (Premier League) status in 2015/16 is an absolute necessity
for the future wellbeing of our club.”

That might sound a little worrying, but it is a very similar
story at other Premier League clubs. In fact, no fewer than 11 clubs had a
higher reliance on TV money than West Ham in the 2013/14 season with Crystal
Palace, Swansea City, Hull City and WBA all depending on TV for more than 80%
of their revenue.

Considering the significance of Premier League television
money to the Hammers, it is worth exploring how this is distributed in some
detail. In 2014/15 their share rose 4% from £74 million to £76million. This is
based on a fairly equitable distribution methodology with the top club
(Chelsea) receiving £99 million, while the bottom club (QPR) got £65 million.

Most of the money is allocated equally to each club, which
means 50% of the domestic rights (£22.0 million in 2014/15), 100% of the
overseas rights (£27.8 million) and 100% of the commercial revenue (£4.4
million). However, merit payments (25% of domestic rights) are worth £1.2
million per place in the league table and facility fees (25% of domestic
rights) depend on how many times each club is broadcast live.

In this way, West Ham were helped by climbing one place to
12th, but were held back by being broadcast live on one less occasion. However,
they were still shown live 13 times, 4 more than Stoke City, which meant that
they earned £2.2 million more (£11.0 million compared to £8.8 million), even
though the club from the Potteries finished three places higher in the league.

My estimates suggest that West Ham’s 12th place would be
worth an additional £35 million under the new contract, increasing the total
received to an incredible £111 million. This is based on the contracted 70%
increase in the domestic deal and an assumed 30% increase in the overseas deals
(though this might be a bit conservative, given some of the deals announced to
date). Of course, if West Ham could maintain their current 5th place, they
would earn even more.

West Ham would also be targeting European qualification,
which could bring in additional revenue, though their 2015/16 Europa League
adventure will not generate much money, as they crashed out early to Romanian
side Astra Giurgiu.

The Europa League is not a great money-spinner, unless you
somehow manage to win the competition, but Everton did earn €7.5 million last
season for reaching the last 16. The big money is obviously in the Champions
League with English clubs averaging €39 million in 2014/15 and is getting
higher, as the new TV deal from the 2015/16 season is worth an additional
40-50%, thanks to BT Sports paying more than Sky/ITV for live games.

This might feel like a somewhat unlikely ambition, but not
if you listen to the two Davids. Gold said, “Realistically, in the next five
years we would expect to be knocking on the door of Europe, The longer-term aim
is to frighten the big boys of Chelsea, Manchester City, Manchester United,
Arsenal and Liverpool. We want the big five to be looking over their
shoulders.”

Stirring words, but they were echoed by Sullivan: “I’d love
fourth now and we’d take our chances. I know it’s unlikely, but it really is
possible.” His optimism is admirable, but he slightly ruined the effect when he
started to talk of winning the Premier League and FA Cup double, “We’re very,
very optimistic. I’m not talking it down. I want to talk it up. I believe it’s
achievable. Look at what’s gone wrong with Chelsea – that looked an
impossibility – so why shouldn’t the opposite happen to us?”

Match receipts rose 2.3% (£0.4 million) from £19.5 million
to £19.9 million in 2014/15, even with one less home game (due to the run to
the Carling Cup semi-final the previous season), as the average attendance rose
2.5% from 34,007 to 34,874.

West Ham supporters have lamented the club’s high ticket
prices with the BBC Price of Football survey showing that 15 of the 20 Premier
League clubs offered cheaper season tickets in 2014/15, despite prices being
frozen that season. Even though the last season at Upton Park has seen a 5%
price increase, season ticket sales for 2015/16 have exceeded 25,000, another
club record.

The loyalty of the club’s fans is shown by attendances
remaining at around the 34,000 level in the top flight, however well or badly
the team has performed. The only slight blip came in the Championship in 2012,
but the Hammers still averaged more than 30,000 in the second tier.

Nevertheless, West Ham’s match day revenue of £20 million is
nowhere near Arsenal and Manchester United (both around £100 million), though a
more valid comparison might be Tottenham, whose £44 million is more than twice
as much.

This underlines the importance of the move to the Olympic
Stadium, which should significantly increase West Ham’s revenue, not just
because of the considerably larger capacity, but also the availability of more
corporate hospitality and premium seats. Brady confirmed that only 200 of the
3,700 premium seats remained available.

The good news for fans is that many tickets in the new
stadium will be sold at lower prices with thee cheapest season ticket being
reduced to £289. While Brady was keen to link this to the benefits of the new
broadcasting contract, others have pointed out that this is easier for West Ham
than most, due to their extraordinarily generous stadium deal.

Commercial revenue rose 9% (£1.8 million) from £20.0 million
to £21.8 million, comprising £14.6 million from commercial activities and £7.3
million from retail and merchandising.

Even though Brady proudly proclaimed that West Ham are
“officially recognised as one of the world’s leading football brands by
Brandfinance, placing us in the top 8 most valuable football brands in Premier
League clubs and 16th overall in the world”, the fact remains that their
commercial income pales into insignificance compared to heavyweights such as Manchester
United, who generate £196 million from this activity.

That comparison might be a little unfair, but it is worth
noting that Tottenham earned £42 million and Aston Villa and Newcastle United
£26 million (in the 2013/14 season). Growth was a little disappointing,
especially given that commercial and administrative staff rose from 136 to 164.

To be fair, the growth is sure to be better in the 2015/16
season, thanks to new sponsorship agreements. Less than a month after previous
shirt sponsor Alpari went out of business, West Ham signed a three-year deal
with online bookmaker Betway worth £20 million. This is worth £6.7 million a
year, so more than double the £3 million that Alpari were paying.

Similarly, a new five-year kit supplier deal was signed with
Umbro, which is reportedly worth twice as much as the previous deal with
Adidas, which was valued at an estimated £2 million.

Given the higher profile afforded by the Olympic Stadium,
the move should deliver plenty of commercial opportunities with the board
noting that the club is already “receiving approaches from big brands that are
desperate to be part of our exciting journey.” Furthermore, the new club
megastore with 12,000 sq ft will be three times as large as the current club
shop. In time, this should be reflected in much higher commercial income.

Wages rose 14% (£9 million) from £64 million to £73 million,
despite players, management and training staff falling from 100 to 93, leading
to the wages to turnover ratio worsening from 56% to 60%. Since the first
season back in the Premier League in 2013, wages and revenue have both grown at
a similar rate: wages by (29%) £17 million and revenue by (34%) £31 million.

The wage bill will be inflated by having four reasonably
high-profile players on loan (Alex Song, Carl Jenkinson, Victor Moses and
Manuel Lanzini), while it will also be impacted by extending the contracts of
some players (Diafra Sakho, Aaron Cresswell and Winston Reid).

The amount paid to the highest paid director, believed to be
Brady, was virtually unchanged at £646,000.

Although West Ham’s wages to turnover ratio increased, it is
still the second best the club has recorded in the last seven years and much
better than the 90% suffered in the Championship. It is also well within the standard
achieved in the Premier League with 13 of the 20 clubs grouped in a fairly
narrow range of 56-64% the previous season.

West Ham’s wage bill of £64 million was only the 13th
highest in the 2013/14 season, exactly in line with their league placing. Even
though this has increased to £73 million, to place this into context, it is
only around a third of the elite clubs, who all pay around £200 million:
Manchester United £203 million, Manchester City £194 million, Chelsea £193
million and Arsenal £192 million.

Nevertheless there is a clear bunching of clubs in the
£60-70 million range, as the traditional bigger spenders like Newcastle United,
West Ham and Aston Villa have only grown a little, while the nouveaux riches like
WBA, Stoke City, Swansea City and Southampton have all had to significantly
increase their wage bill in order to compete.

It is worth noting that West Ham’s wage bill has only risen
by 8% since 2008, while others have grown much faster, e.g. Stoke City 411%,
Southampton 362% and WBA 211%.

Sullivan did warn that the club would be restricted by FFP,
following the big spending this summer: “As a result, we are now at the maximum
wages we are allowed to pay under Premier League rules and, therefore, if we
wanted to buy again in January we would no doubt have to sell someone before we
would be allowed to make signings. It also means we expect the club to make a
loss of between £10m and £17m this year, depending on where we finish in the
Premier League and the number of games we have televised. This is indicative of
just how seriously we took this window and the signings we wanted to make.”

This has been reflected in “major investment in the first
team squad of £32.5 million (2014/15) and £42.0 million (2015/16)”. Last season
saw the arrivals of Mauro Zarate, Enner Valencia, Aaron Cresswell, Cheikou
Kouyate, Diafra Sakho, Diego Poyet and Morgan Amalfitano. Subsequent to the
latest accounts, the club invested in Pedro Obiang, Dimitri Payet, Angelo
Ogbonna, Michail Antonio, Nikica Jelavic, Stephen Hendrie and Darren Randolph.

Although reported transfer figures are notoriously
unreliable, it is clear that there has been a major ramping up of expenditure
in the four seasons following promotion. In that period, West Ham have a net
spend of £93 million, averaging £23 million a year, compared to just £3 million
in the preceding six years.

In fact, over that four-year period, West Ham were the 6th
highest net spenders in the Premier League, only beaten by the usual suspects:
Manchester United, Manchester City, Chelsea, Liverpool and Arsenal.

This is all driven by the club’s desire to maximise the
chances of staying in the Premier League until the move to the Olympic Stadium.
As Sullivan said, “I cannot remember a more exciting or successful window during
our time at the club. We brought in 12 new players at a cost of over £40m, but
that was only possible because David Gold and I made sure we dug deep to get
the players we wanted. We thought it was important this season, with the move
to the new stadium, that we bought players in every position to create the best
squad and team that has been at the club since we arrived.”

Despite this spending spree, net debt actually fell £6.8
million from £73.5 million to £66.7 million with gross debt being cut by £2.5
million to £89.1 million and cash increasing by £4.3 million to £22.4 million.
Around £49 million of the debt has put in by the owners, David Sullivan and
David Gold, as unsecured shareholder loans – unchanged from the previous year.
This represents over half of the club’s gross debt of £92 million, leaving £39
million of external debt and £0.6 million of debenture loans under the Hammers
Bond Scheme.

External debt includes secured bank loans with interest
charged at 3% to 3.75% over LIBOR, which have been refinanced until December
2016, though the club repaid £6.5 million on 31 August after the accounts were
finalised. The club has also arranged additional short-term finance of £30
million with JGF Limited, secured on future income from the Premier League
broadcasting contract, which is repayable in August 2016 and replaces the
previous loan with the Vibrac Corporation. To date, £25 million of this
facility has been drawn down.

"Diamond Smiles"

In addition to the financial debt, West Ham had £22 million of net transfer fees payable plus £9 million of contingent liabilities (dependent on the success of the football club or players making a certain number of club or international appearances). On top of that, there is a further net £37 million of transfer fees payable for players purchased after the accounts closed.

Furthermore, interest of 6-7% has been accrued on the owners’ loans, but is not paid or added to the loans until the loans are repaid, so there is another £9 million of potential debt “hidden” in accruals.

It is clear that West Ham are building up their debt in order to give themselves the best chance of success, both in terms of financial debt and transfer debt, though this is probably OK, so long as they avoid relegation.

In fairness to West Ham, there are seven clubs in the
Premier League that owe more than them with five having debt above £100
million, namely Manchester United £411 million, Arsenal £234 million, Newcastle
United £129 million, Liverpool £127 million and Aston Villa £104 million.

Moreover, the club has pledged to be free of external debt
by the time it leaves the Boleyn Ground. The hope is that the proceeds from the
sale of the Boleyn Ground to Galliard Homes will cover the Olympic Stadium £15
million conversion fee plus “some of our bank debt”.

According to the profit and loss account, West Ham’s net
interest payable of around £6 million is one of the highest in the Premier
League, albeit considerably lower than Manchester United £35 million and
Arsenal £13 million. However, the cash payment is only £2 million, as the
interest on the owners’ loans is not being paid.

West Ham’s improved finances are also reflected in the cash
flow statement. Taking 2014/15 as an example, the club generated an impressive
£43 million from operating activities, before spending £31 million on player
registrations, investing £2 million in infrastructure and making £2 million of
interest payments. They then made a net £2.5 million loan repayment, leaving a
positive cash flow of £4 million.

This is indicative of the approach that Sullivan and Gold
have taken since 2010, though they have not had to invest so much personally in
the club in the last two years. In those six years, West Ham generated £69
million of cash from operating activities, which was supplemented by £75
million of financing from the owners (£49 million from loans and £26 million
from an increase in share capital), giving £144 million of available funds.

Around two-thirds of this (£95 million) was spent on new
players, £22 million on loan and interest payments and £8 million on capital
expenditure. The remaining £20 million has served to increase the cash balance.

In line with the trend at other clubs, West Ham’s cash
increased last year from £18 million to £22 million, though this is still a
long way behind the leaders, e.g. Arsenal £228 million, Manchester United £156
million and Manchester City £75 million.

Sullivan and Gold now own 86.2% of the club and, though they
have insisted that it is not for sale, West Ham is fast becoming an attractive
investment opportunity. Indeed, last year they expressed a desire to sell some
shares, valuing the club at £400 million.

Wealthy buyers will certainly be interested in purchasing a
club of West Ham’s history in an iconic new stadium with massive potential to grow
attendances, match day income and commercial revenue. There are a lot of
parallels with Manchester City with the added advantage that the Hammers are
not only located in London, but in an area that has already received an influx
of foreign investment with Qatar purchasing the Olympic Village and China
pouring money into the Docklands.

"Handy Andy"

If the club is sold following the move to Stratford, some of
the profits would be returned to the taxpayer, but it is not clear what
proportion. The only potential fly in the ointment would be if the club had to
pay compensation if their move were deemed to contravene European state aid
laws.

The other appeal to investors is FFP, especially as UEFA
have recently relaxed the regulations for new owners, who will now be allowed
to make larger losses, as long as they can produce a business plan that will
show how they will reach break-even. This modified stance is a move from
“austerity to sustainable growth” in an effort to encourage investment into
European football.

"Don't Look Back in Anger"

West Ham are firmly in favour of FFP, according to Brady:
“FFP is the legislation which, for the next season at least, will limit the
ability of clubs to over-extend themselves on players’ costs and will likely
enable all clubs, including ourselves, to increase profitability, and we
continue to operate within the rules. We are hopeful that FFP will continue in
some form in the next broadcast deal.”

As it stands, West Ham are arguably now one of the most exciting
“projects” in European football. Whatever the rights and wrongs of the Olympic
Stadium deal, it is difficult to disagree with Brady, when she says that it
will be a “game changer for West Ham”. The challenge will be to advance into
this brave new world, while retaining the characteristics of what Slave Bilic
described as “a cult club”.

Praise for The Swiss Ramble

"Blogger of the Year 2013 - It’s testament to the effect that Kieron has had on the blogosphere that so many fans take his word as gospel. Putting to use his career in the world of finance, his insights into balance sheets and simple explanations of complex ideas appeal to the hardcore financial whizz and casual fan alike." - The Football Supporters' Federation